VIEW: Nomura: ECBspeak To Continue Talking Up Further Rate Hikes

Nomura note that “since the ECB’s May meeting, a number of Governing Council members have made various arguments reiterating Lagarde’s more hawkish rhetoric from the press conference, underscoring that the ECB will raise rates further.”

• “In our view, forthcoming ECBspeak will continue to emphasise “more ground to cover” and try to talk up terminal rate pricing. Markets currently have between one and two hikes priced in. We expect the ECB to deliver two more 25bp hikes, bringing the terminal depo rate to 3.75%.”
• “Importantly, hawks within the ECB Governing Council will want to make clear they are not backing down on inflation. Moreover, further ECBspeak could very well try and talk up rate hikes beyond July so as to maintain expectations that the ECB has more to do (even if they don’t end up hiking beyond July) and that it will not begin cutting this year.”